California About to Protect VoIP from Being Regulated

The number of states looking to prohibit their public utilities commissions from regulating voice over IP (VoIP) and Internet services without explicit authority from their respective legislatures is about to hit 24, as with the expected signing of California SB 1161 by Governor Jerry Brown. Passed by a wide margin in May by the California Senate, it recently got over-whelming support in the state Assembly in a 63-12, overcoming objections by academics and consumer groups.

In reading some of the postings about all of this, as with so much of what passes as policy debate these days, the selective use of facts and historical revisionism on this particular subject has been interesting. In fact, if you’d like to read a particularly good diatribe, I recommend an op-ed written by Larry Downes which was posted on the Capitol Weekly website and which also appeared on forbes.com.

If nothing else, you have to admire Mr. Downes’ passion about the subject if not his objectivity. I happen to agree that when it comes to something as important as the decision to either regulate or not regulate next generation communications services as utilities, or tax them for that matter, decisions such as these should not be the sole purview of regulatory agencies.

Legislatures can and should play a role, but as to what that role should be in an age where voice is now packetized and those packets can be routed from anywhere to anywhere in the establishment of an interactive session certainly is problematic. It also is problematic in an age where the utility of having broadband access is moving to the point of being not just a necessity but a right that should be overseen by government to assure what the mandate of the FCC has been since 1934 of assuring individual access on at reasonable prices.

I would refer Mr. Downes to pictures of downtown Manhattan in the early 1900s where “competition” and the rule of the marketplace meant that if I wanted to call you, we both needed to subscribe to the same provider and be connected over their dedicated links. No wire to you – no connectivity.

But I digress just a bit.

The author points to the fact that there is current consumer choice for over 125 VoIP providers. Ah, but how many of those own outside plant?

For those readers who are aware of my history in the industry, I have been writing for several decades at various points about how economically inefficient it is to have competing physical providers of network access and transport for serving the mass market, i.e., you and me at home. I also happen to think that the FCC’s decision many years ago to try and tdraw enforceable decisions between what constituted a traditional telecom service and what was a “information service” was why we find ourselves constantly debating this mess in the first place.

Several years ago, I suggested that the traditional telecom companies should divest their outside plant along with cable companies doing the same since in an era where true value creation resided in servers and not physical connections they would then be unleashed to invest more heavily in terrific new services like HD VoIP, IP Video and VoLTE just to name a few. The alternative is a rigorous equal access and equal interconnection regime where cost causers, thing Google, Facebook, Apple etc., are also cost-bearers. The notion of a free ride somehow seems antithetical to our culture and at the end of the day the local outside plant “utility” would be there to take the traffic of all of those willing to pay their fair share to meet my needs. Wall Street would be thrilled by such a divestiture. Plenty of entities would love to be responsible parties for all or part of that new local utility and consumers would be big winners.

Back to the California legislation for a moment. The days of telecom networks with central offices, local hard-wired exchanges, etc. have given way to the digital age where the boundaries of geography and even time make no sense. Number portability and wireless have been accelerants of the death of the PSTN that is now predicted to take place in just the next few years. Because of the criticality of access to digital age and the common good it empowers, like I said, leaving this solely up to the PUCs is to put it bluntly “nutty.” However, thinking that state legislatures have special insights to make this all better, or a merely just there to assure certain interests do not have be cost-bearers does not appear to be much of a salutatory remedy either.

Unfortunately, looking to the FCC and Congress on this does not inspire confidence.I happen to be both a realist and optimist, and that is a problem. The realist says that my solution cannot happen in the real world. The optimist says like good wine such things take time to mature and never is a long time. What we need are some really good externalities that say divestiture is the best path forward. All I can say is that I have my fingers crossed. PSTN RIP!